Ryland touts benefits of global focus

Mac Ryland, principal of Kurt Salmon Associates, spent the past year preparing for his presentation on the global shift of the textile industry here at Context.

And in that span of time, milestones were made in trade relations that further supported Ryland's theory that U.S. textile manufacturers and importers are increasingly more globally focused.

"Sourcing is more available now. It comes with high risks but also significant opportunities," Ryland told an audience of the more than 70 retailers and manufacturers.

Ryland explained that the catalyst for the global shift was the United States' agreement to grant normal trade relations with China as of summer 2000, opening the doors for American home textile manufacturers and retailers.

However, China has yet to apply for admission into the World Trade Organization, posing strong hurdles for U.S.-based manufacturers looking to export goods to China, he said.

International textile investment is accelerating, Ryland noted. The cost to build a textile factory overseas is $100 million — 10 times the cost for an apparel factory.

"This requires reasonable assurance that the factory will be utilized full-time for many years," Ryland said.

In the case of the two main home textile categories manufactured and imported abroad, sheets and bath towels, both have grown "at a time when people said it didn't make sense because there weren't enough people in the labor market," Ryland said.

The U.S. sheets and pillowcase market has increased to 25 percent from 10 percent in four years due to trade with China, Pakistan, Portugal, Israel, India, Mexico and Italy. The bath towel market has grown to 27 percent from 16 percent during the same period of time because of increased trade with Pakistan, India, China, Brazil, Turkey, Mexico and Thailand.

The question is, Where are these items sold? Ryland said solid colors are sold in channel for accessory items — bed, bath and kitchen. Many new retail formats are already sourcing off shore, including Crate & Barrel and Pottery Barn and direct retailers like L.L. Bean and Domestications. Most brands, Ryland further noted, also import direct, like Tommy Hilfiger, Ralph Lauren and Martha Stewart.

The driving factor: costs of manufacturing, including costs for labor and non-direct labor.

Labor costs in the United States — 23 percent of total manufacturing cost — far exceed those in Mexico (6 percent) and China and India (both 2 percent), "giving you a labor advantage off shore," Ryland told his audience.

But offsetting U.S. labor costs are charges on freight and labor duties off shore, Ryland said, which U.S. manufacturers save on.

"Something is happening with raw materials in some places overseas," Ryland said. "With some of the lower-grade cotton, there's an excess of it. While they sell it for 40 cents per pound, in India it would cost 20 cents per pound, creating a price break."

But even with such kinds of savings, not everyone is going overseas, "for many huge reasons," Ryland said.